Abolish the Corporate Income Tax!

Before his committee sat, unapologetic and uncontrite, Apple CEO Tim Cook, whose company had paid no U.S. corporate income taxes on the $74 billion it had earned abroad in recent years.

“Apple has sought the Holy Grail of tax avoidance,” said Levin. “Apple has exploited an absurdity.”

Actually, Apple had done nothing wrong, except hire some crack accountants who chose Ireland’s County Cork as the headquarters of their international division. Thus Apple paid on profits earned outside the U.S.A. nothing but a 2 percent tax imposed by the Irish government.

Far from being condemned, Apple’s CPAs ought to be inducted into the Accountants Hall of Fame.

It is no more immoral for Apple to move its headquarters for foreign sales to Ireland than for Big Apple residents to move to Florida to escape the 12 percent combined state and city income tax.

Among the reasons the Sun Belt is booming at the expense of the Rust Belt is not just the weather. Southern states strive to keep income and estate taxes low or nonexistent. They want companies and families to relocate and live there, and to spend their money there.

The problem here is not with Apple, it is with Sen. Levin & Co.

In a press release, “Avoiding Their Fair Share of Taxes,” the AFL-CIO hails Levin and bewails the fact that though the U.S. corporate tax rate is 35 percent, highest in the world, corporate income tax revenue has fallen to well below 10 percent of federal tax revenue.

“Another corporate tax avoidance strategy is to move overseas to a corporate tax haven like Bermuda. By reincorporating offshore, companies avoid paying federal income taxes on profits earned outside the United States.”

Yes, they do. But instead of bewailing this, perhaps we should start thinking and acting as our forebears did. In the same Wall Street Journal that reported on Cook’s defense of Apple, former Sen. Phil Gramm described that earlier America:

“Over the late 19th century, real GDP and employment doubled, annual average real earnings rose by over 60 percent and wholesale prices fell by 75 percent, thanks to marked improvement in productivity.”

Astonishing. And what is the difference between that age and ours? A 35 percent income tax rate on individuals and corporations that did not exist then, and would have been regarded by Americans of the Gilded Age as the satanic work of Friedrich Engels and Karl Marx.

From the Civil War to World War I, our economy grew from one-half the size of Great Britain’s to twice Britain’s. American companies were capturing markets abroad. Today’s U.S. companies are looking for ways to relocate abroad.

Herewith, a modest proposal to turn this around.

Since the U.S. corporate income tax now produces less than 10 percent of federal revenue and less than 2 percent of gross domestic product, abolish it. Get rid of it.

Think of it. A continent-wide nation that doesn’t tax business.

Assume this would cost the Treasury $250 billion in lost revenue.

How to make it up? Put a 10 percent tariff on imports entering the United States, which last year added up to $2.7 trillion.

This tax reform would thus be revenue neutral.

And what would a corporate income tax rate of zero, with a 10 percent tariff on goods entering the U.S.A. from abroad, accomplish?

First, every U.S. corporation that had moved abroad in search of lower taxes in recent years would start thinking about coming home and bringing its production and its jobs back to America.

Second, that $2 trillion in income U.S. companies have stashed abroad would come roaring back into U.S. institutions.

Third, foreign companies would begin to relocate and produce here in America, both to get around the tariff and pay no taxes.

Fourth, U.S. producers would see sales soar inside the $17 trillion U.S. market, at the expense of foreigners who would pay a 10-percent admission fee to get into this market, a fraction of what they used to pay in the 19th century.

While this would cause a surge in unemployment among IRS agents and accountants, hundreds of millions of man hours could be redirected away from filling out tax forms and into productive work.

“Since 1980, the U.S. has run trade deficits in every year totaling about $9 trillion,” writes columnist Robert Samuelson.

That is 9 thousand billion dollars in trade deficits!

It is what unmade America as a self-reliant republic and made China a manufacturing marvel. And those trade deficits are how America became a dependent nation in hock to the world.

From 1865 to 1914, America had 10 Republican presidents. All believed in financing government by taxing imports, not the incomes of U.S. citizens or the U.S. companies that employed them.

And this was how the miracle Sen. Gramm details came about.

Books by Pat Buchanan may be found in The Imaginative Conservative Bookstore. Republished with gracious permission of the author. Copyright 2013, Creators.com.

The Imaginative Conservative applies the principle of appreciation to the discussion of culture and politics—we approach dialogue with magnanimity rather than with mere civility.

2 Comments

Mr. Buchanan says: “From 1865 to 1914, America had 10 Republican presidents.” This is not correct.

The US had 12 presidents (actually, 10 individuals, since Cleveland is counted twice) from Lincoln’s (#16) assassination in April 1865 through 1914, which was the second year of Wilson’s (#28) first term. Of the 11 individual presidents during this period, Andrew Johnson, Cleveland and Wilson were not Republicans, leaving only 8 Republican presidents in this era (Grant, Hayes, Garfield, Arthur, Benjamin Harrison, McKinley, Teddy Roosevelt, and Taft). While Andrew Johnson, a lifelong Democrat, was elected vice president on a “National Union” Ticket with Lincoln in 1864 (a temporary “national unity” set-up that was an attempt to draw Democrat votes), Johnson never became a Republican and was bitterly opposed by Republicans during his presidency after Lincoln’s death. However, even if you count Johnson as a Republican, that still yields only 9 Republican presidents. Perhaps the writer was counting Lincoln in the 10 presidents, but that would really undercut his point, since the federal government instituted an income tax to finance the prosecution of the Civil War.

If maximize profits and self-interest are your only concerns, then what Apple did was correct. But such ethics also justify hiring sweatshop labor to make one’s products. All together, there is a denial the existence of externalities. Externalities such as how long can a financial system last when those making the most are so successful in paying either the least or nothing for society’s services?

See, the issue isn’t whether we can do some tariff reforms to replace missing corporate tax revenues destined for the public coffers. Such doesn’t address the main issue. The real issue are the business cultural ethics of self-interest and maximization of profits. That is the real issue because it is the driving force for many decisions including deciding on what taxes to pay, what to pay employees, and how to treat the environment. And this is especially true since all corporations operating in the US enjoy tax supported societal benefits. The demand to abolish the Corporate income tax is nothing more than the command of a spoiled child made to society to provide a free lunch.

And as a Christian Fundamentalist, what hurts me is how economic conservatism uses the Christian religion as a banner for living according to greed and self-ambition. Such, as what is said this blogpost, confirms what Marx said about the Bourgeoisie and Capitalism:

“The bourgeoisie, wherever it has got the upper hand, … has left remaining no other nexus between man and man than naked self- interest, than callous “cash payment”. It has drowned the most heavenly ecstasies of religious fervour, of chivalrous enthusiasm, of philistine sentimentalism, in the icy water of egotistical calculation. It has resolved personal worth into exchange value, and in place of the numberless indefeasible chartered freedoms, has set up that single, unconscionable freedom – Free Trade. In one word, for exploitation, veiled by religious and political illusions, it has substituted naked, shameless, direct, brutal exploitation.”

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